As far as I know, there is usually a betwixt in choosing the right value for a threshold. A trade off between bias and variance has to be encountered.
If a low threshold is chosen, the number of observations (exceedances) increase and the estimation becomes more smooth.
However, low threshold also introduces some observations from the center of the distribution and the estimation becomes biased.
On the other hand, a relatively high threshold eliminates values that would have been part of the extrema hence a higher variance in the estimations.
How do I know the value of a threshold chosen is fit to produce the best results? Moreover, If I am to do a trade off between , what would be worth? Overlook bias and ensure minimal variance or forsake variance and combat bias? Which is better? Are there any texts that I can refer to?